Commodity prices drop across the board; Budget Woes – what livestock sector needs

Commodity prices drop across the board

Correction was inevitable and it happened this week. Commodity prices across the board dropped from 3 – 10% over last week.

Maize prices dropped by 3% over last week on an average, with the prices at market yard at Rs.7200 – 7300 per MT. The prices are still higher than last year by 20.5%. Though the prices dropped all over the country, specially in Madhya Pradesh, prices reached Rs.6900 per MT at the market yard, Tamil Nadu Rs.7000 per MT, and Gujarat Rs.8900 per MT. In Rajasthan and Uttar Pradesh the prices moved up slightly.

Bajra (Pearl Millet), prices dropped by 1.2% over last week, levelling at Rs.6700 – 6800 per MT range. The prices are also lower than last year by 8.2% and 7.3% lower than maize.

Jowar (Sorghum) prices also fell by 10.2% over last week, reaching Rs.8500 – 8600 per MT. The prices are higher than last year by 5.8% and also higher than maize by 17.3%.

Barley prices went up by 1.5% over last week, reaching Rs.8500 – 8600 at the market yard.

The correction most probably is attributed to the rumours that the forward trading in the commodities might be stopped, as it is speculative and leading to prices rise and higher inflation.

The annual rate of inflation (Year on year basis) for week ending Feb 10, 2007 came down a wee bit to 6.63%, but is still higher than the RBI rate of 5 – 5.5%.

Market is US also went up over the week, with prices for Mar delivery at CBOT closing at $169.35 per MT, up from $164.16 per MT. Prices for May, Jul and Sept quoted at $174.15, $177.93 & $171.40 per MT respectively.

Budget Woes – what livestock sector needs

It is budget time again, lot of speculation and requests. The livestock sector needs the infrastructure like processing plants, distribution channels, testing facilities. The big question though is what will drive the development and investment in creating the infrastructure for the livestock sector. The way the dairy sector specially the co-operative segment has developed, it has been primarily by the funds received from the government.

While many in the live stock sector believe that provision should be made for direct subsidy to set up the processing parks, plants and testing centers, there is a general belief that if GOI provides tax holidays, by way of sales tax rebate on end products, excise rebates etc, which will provide impetus to the private sector to invest in food processing specially livestock products.

Of the total perishable produce only 2% of fruits & vegetables, 35% of milk, 21% of meat and 5% of poultry is processed. The investment in this sector will not only lower the losses in agriculture, but will provide better prices to the farmers and boost employment generation in the area. The loss of revenue by way of tax holiday will be a small price to pay for providing safe value added produce to the citizens of the country and also creating employment opportunities for many.

Amit Sachdev
Representative
U S Grains Council, India
bluecross303@gmail.com

Feb 24, 2007

No stability in maize prices; Is it in India only that the grain prices are high?

No stability in maize prices

Despite a duty free import allowance on maize until Dec 31, 2007, there has been no respite in the maize prices. The prices moved up by another 1% over last week at the market yard, reaching Rs.7500 – 7600 per MT at the market yard. Delivery prices range from Rs.8600 – 9500 per Mt depending on the distance from the market. The prices are about 27.5% higher than last year. Unless availability of maize improves, it unlikely that the prices will stabilize. The small rabi crop will help stabilize the prices in the next 2 months, but the big question remain what next. The new big crop will only be available in October 2007, which is still 7 months away.

Pearl Millet (Bajra) prices also went up by about 1% over last week, Rs.6800 – 6900 per MT at the market yard. The prices are similar to last year levels, and are also lower than maize by about 9.3%, giving option to farmers in the northern part of the country to replace 5-10% of maize with pearl millet and help them bring down cost of production.

Sorghum (Jowar) prices went up by 9% over last week at Rs.9400 – 9500 per MT at the market yard. The prices are approximately 35% higher than last year. As against maize the prices are higher by 23.6%.

Barley prices levelled at Rs.8300 – 8400 per MT at the market yard, and were lower by 2% over last week.

GOI reported a further increase in the rate of inflation (YoY) to 6.73% for thw eek ending Feb 3, 2007. Some experts blame it on the future trade, while most are of the opinion that the increase in Wholesale Price Index (WPI) and inflation is due to the supply side constraints, which is understandable as the grain production has not kept pace with the increase in demand.

The future prices of maize on the NCDEX also went up. For May and June delivery the prices last week were Rs.8260 per MT, and went up to Rs.8350 for May, up 1% and Rs.8430 per MT, up 2% from last week. The delivered prices in May for local maize will be Rs.9200 – 10400 per MT depending on the area of delivery and for June the prices would be Rs.9300 – 10600 per MT.

Prices at CBOT also went up from $160 for Mar delivery last week to $164.16 per MT, a sharp increase of2.6%. For May and June delivery the prices are $169.04 and $172.26 per MT respectively.

It is important to understand that if importers wish to import from any destination, a lag time (time between purchase and delivery) must be built into it and the parity (if they wish to calculate) must be calculated for the time of delivery and not time of purchase.

Is it in India only that the grain prices are high?

Many analysts have blamed US ethanol industry for the high prices of Tortillas in Mexico. That is not the case. It is the supply side issue and Tortillas are made from white corn, which is a scare commodity in Mexico due to lower production. With high demand and low supply, the prices are bound to go up.

It is not only in India that the grain prices are a matter of concern. Prices of grain are fueling inflation in countries like China, Turkey and Argentina as well.

Turkey plans to import 300,000 tons of maize to stabilize prices. China is also importing some quantities of maize (corn) and at the same time restricting exports of soybean. Argentina also is restricting imports of maize (maize) by putting an additional export tax.

The high prices of maize are showing in the increased price of meat and eggs as well. Chicken prices rose higher than normal one due to high feed prices, but also due to supply side constraints and sudden low placement of broilers, but higher steady demand, especially in the institutions. Prices in North India went up to Rs.53 per kg (live), while in Hyderabad prices were Rs.44 per kg (live). Egg prices in North were Rs.220 – 225 per 100 eggs.

The farmers are happy that they are getting better prices and are recovering the losses made by them in the past year be to bird flu, but the party is not going to last forever. As the placements are back to normal and demand slides in the coming months, prices are surely going to decline, but the farmers certainly have discovered a new price, which they would like to maintain due to the high cost of production of chicken and eggs.

Amit Sachdev
Representative
U S Grains Council, India
bluecross303@gmail.com

Feb 17, 2007

Maize prices move up yet again; Efficient Use of Feed Stocks

Maize prices move up yet again

The maize prices in India moved up yet again, this time by about 3.6% over last week, averaging Rs.7400 – 7500 per MT at the market yard. The delivered prices were over Rs.9600 per MT. The prices at the market yard were higher by 24.4% over last year. The highest prices were recorded in Gujarat Rs.8865 per MT at the market yard. While in Tamil Nadu, a major consumption centre the prices moved from Rs.6600 per MT of last week to Rs.7200 per MT, an increase of about 9%.

Pearl Millet (Bajra) prices were down by 1.5% over last week, reaching Rs.6700 – 6800 per MT at the market yard. The prices were also about 1.5% lower than last year. Against corn the prices of pearl Millet were 9.5% lower this week.

Sorghum (Jowar) prices went up by 0.7% over last week at Rs.8700 – 8800 per MT at the market yard. The prices are approximately 30% higher than last year. As against corn the prices are higher by 17%.

Barley prices levelled at Rs.8500 – 8600 per MT at the market yard, and were lower by 9.5% over last week.

The increase in prices of essential commodities, inputs is showing up in the rate of inflation which reached 6.58% in the first week of Feb 2007.

Corn prices at CBOT moved up slightly, with prices rallying at $159.93 (March), $164.56 (May), $167.02 (Jun), $166.98 (Jul). The FOB values (US Gulf) for the future also moved up slightly $179.20 (Feb), $178.45 (Mar), $179.50 (April) and $180.30 (May).

The USDA pegged ending stocks at 19.1 MMT, which was below the average trade estimate of 19.456 MMT. World ending stocks for 2006/2007 were pegged at 87.9 MMT, up from 86.4 MMT posted last month but down from 124.5 MMT last year, almost a drop of 30%. Argentina corn production was revised higher to 21 MMT from 19 million last month, an increase of 2 MMT, and Brazil's production was boosted to 46 MMT from 42 MMT last month. This addition of 6 MMT might help in keeping a check on world maize prices. The total world usage is also likely to jump by 3 MMT in 2007 as the USDA report.

Efficient Use of Feed Stocks

As the prices of commodities skyrocket, it becomes essential to make the best use of the new techniques to enhance the efficiency of production. The US Grains Council in an effort to provide an insight into the new technologies in grain processing invited Professor Vijay Singh, Assistant Professor, Department of Ag. & Biological Engineering, University of Illinois at Urbana-Champaign, USA to India to provide the details to Starch producers.

Under the conventional system it is necessary to soak maize (process called steeping) for at least 24 – 36 hrs and use of Sulfur Di-oxide gas is required. The high use of water, also requires higher capacity effluent treatment plants and as the water is scarce commodity it will be essential to find alternatives.

In the new method, using enzymes, the soaking time has been reduced considerably to 6-8 hrs. In addition, it has been reported in the trails that the average starch yields are higher by 3 – 4%, than the conventional method. In addition the new system allows use of Broken Corn, saves on water and operating costs such as steam (for steeping and steepwater evaporation).

The information will certainly help the starch manufacturer increase the efficiency of production, and is a way to keep a check on prices. Starch and its products are used in daily life and any increase in the price of maize will affect the prices of products needs on a daily basis in homes of millions of Indians.

Amit Sachdev
Representative
U S Grains Council, India
bluecross303@gmail.com

Feb 12, 2007

Maize prices remain high

Maize prices remain high

Despite a duty free regime announced by GOI on Jan 25, 2007, the details of which can also be found on the link given below

Press release for duty free imports of corn
http://www.cbec.gov.in/cae/press-release/cus-duty-maize.htm

The official notification
http://www.cbec.gov.in/cae/customs/cs-act/notifications/notfns-2k7/cs9-2k7.htm

The maize prices in the mid week did slide down by about 2% to Rs.7200 – 7300 per MT levels at the market yard, but by the end of the week the prices were up to Rs.7800 – 7900 levels at the market yard, thereby registering an increase of 8% over mid week. The delivered prices by the end of the week were up to Rs.10,000 per MT.

The delivery prices in Gujarat, by the end of the week had reached Rs.11000 per Mt levels, ringing alarm bells. In Tamil Nadu, the hub for poultry, the delivery prices touched Rs.9300 per MT.

In the midweek the future prices of maize for Feb, March, April, May were at Rs.7820, 7980, 8140 and 8235 respectively. By the end of the week, the prices were up to Rs.7930, 8100, 8250 and 8380 per MT respectively.

Spot prices of maize at Nizamabad which is the benchmark market were RS.7150 per MT mid week and were up to Rs.7400 per Mt by the end of the week, gaining 3.4% in 3 days.

In all likelihood the prices of maize will remain high due to high demand lower supplies. All will depend on the Rabi crop arrivals in the markets and how prices behave then.

Amit Sachdev
Representative
U S Grains Council, India
bluecross303@gmail.com

Feb 03, 2007